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According to Tesla the merger creates the "world's only vertically integrated sustainable energy company".

The buyout is intended to allow both companies to work on similar products and bring their technologies together. Tesla's battery technologies can be combined with the power generation from solar panels, for example.

"As one company, Tesla (storage) and SolarCity (solar) can create fully integrated residential, commercial and grid-scale products that improve the way that energy is generated, stored and consumed," the company said in a blog post outlining the deal.

It will also help SolarCity become profitable. In February it was reported the company's fourth-quarter revenue had increased but an increase in operating expenses led to "worse-than-expected" losses.

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Tesla believes that by bringing the two companies together it will be able to "achieve cost synergies of $150m" in the first year after closing.

Elon Musk, the largest shareholder in both of the organisations, CEO of Tesla, and chairman of SolarCity, said in June that the deal would allow customers from one arm of a potentially merged company to easily access products from the other.